California Global Warming Solutions Act (AB 32)

Background

On September 27, 2006, then Governor of California Arnold Schwarzenegger signed into law the Global Warming Solutions Act of 2006, or AB 32. The law seeks to fight climate change through a comprehensive program reducing GHG emissions from virtually all sources statewide. The Act requires the California Air Resources Board (CARB) to develop regulations and market mechanisms that will cut the state’s GHG emissions to 1990 levels by 2020—a 25% reduction statewide. AB 32 requires CARB to take a variety of actions aimed at reducing the state’s impact on the climate.

Cap-and-Trade

AB 32 authorizes CARB to use market mechanisms as part of its portfolio of carbon-cutting policies, and on December 17, 2010 CARB decided to pursue a cap-and-trade program. The Board formally adopted the proposed cap-and-trade rule on October 20, 2011. The program is scheduled to begin in 2012, though the compliance period does not begin until 2013. The program places a GHG limit that will decrease by two percent each year through 2015 and by three percent from 2015 through 2020. The cap-and-trade rules will first apply to some of the major emitters—utilities and large industrial plants. In 2015, the rules will apply to fuel distributors as well, eventually totaling 360 businesses throughout California. The market will begin with a distribution of free allowances to regulated businesses. The portion of emissions covered by these free allowances will vary by industry, but generally will account for approximately 90 percent of the business’s overall emissions and this percentage will decline over time. For any additional emissions, the business must purchase the necessary allowances at a quarterly auction or from an entity that has excess allowances. Offsets are also allowed for up to eight percent of a business’s compliance obligation. California’s cap and trade program is scheduled to link with programs in Ontario, British Columbia, Manitoba and Quebec through the Western Climate Initiative.

Association of Irritated Residents, et al. v. California Air Resources BoardIn December 2010, a number of environmental justice associations, including the Association of Irritated Residents (AIR), challenged the California Air Resources Board’s (CARB) selection of a cap-and-trade program as a major element in reaching AB 32’s emission target . AIR’s lawsuit alleged that CARB violated key requirements of AB 32 and the California Environmental Quality Act (CEQA). In March 2011, a Superior Court of California judge ruled that CARB had not sufficiently considered alternatives to a cap-and-trade program and had approved and implemented its plan before completing the necessary environmental impact review (EIR) in violation of CEQA. CARB was ordered to revise its analysis of cap-and-trade alternatives, but was found not be in violation of AB 32. In June 2011, a California Court of Appeal granted CARB a stay to continue implementation of its cap-and-trade program. After the March decision CARB further analyzed alternatives to cap-and-trade, and in December 2011 this revised analysis was accepted as sufficient to fulfill the trial court’s March order. This leaves CARB in the clear to continue implementation. However, AIR has pledged to appeal the March decision that cap-and-trade does not violate AB 32, claiming it does not provide the maximum feasible and cost-effective greenhouse gas reductions.

Other AB 32 Elements

Prepare a Scoping Plan

CARB was required to prepare a scoping plan to achieve the “maximum technologically feasible and cost-effective” reductions in greenhouse gas emissions.

In December 2008, the Air Resources Board approved a scoping plan that will achieve emission reductions through regulations, market mechanisms, and other actions geared toward the emissions of several economic sectors.